Amgen Inc. (NASDAQ:AMGN) 2022 Wells Fargo Healthcare Conference September 8, 2022 9:45 AM ET
Company Participants
Peter Griffith – Chief Financial Officer
David Reese – Executive Vice President of Research and Development
Conference Call Participants
Mohit Bansal – Wells Fargo
Mohit Bansal
Great, thank you very much for joining us today. Good morning. My name is Mohit Bansal. I am one of the biopharma analysts here, at Wells Fargo. And I have great pleasure of having Amgen management team here. So, with us, we have Peter Griffith from — CFO of the company; and Dr. David Reese, EVP and Head of R&D of the company. Thank you very much for joining us today.
Peter Griffith
Great, to be with you, Mohit. Thank you.
David Reese
Yes, thanks for having us.
Peter Griffith
And thanks to Wells Fargo.
Mohit Bansal
Thank you. So, maybe, Peter, I’ll just turn it over to you, if you want to make a brief statement, and then we’ll go right into Q&A?
Peter Griffith
Outstanding. Thank you again.
Mohit Bansal
Right.
Peter Griffith
Thank you, Wells Fargo, for inviting us. We’re delighted to be here. We always started with Amgen’s mission, which is to discover, develop, manufacture, and distribute first-in-class and best-in-class medicines to patients all over the world. So, we start there. And then we like to go right to our strong execution in the second quarter, 1% revenue growth year-over-year, 6% non-GAAP EPS growth, and that excludes the impact of the $1.5 billion Five Prime [IPNRD] [Ph] charge in the second quarter. Second quarter product sales, year-over-year growth was 3%, reflecting 10% volume growth, partially offset by 6% net selling price decline, and 2% unfavorable foreign exchange impacts.
Importantly, ex-U.S. year-over-year volume growth was 20% in the second quarter. We narrowed revenue guidance to $25.5 billion to $26.4 billion reaffirmed non-GAAP EPS at $17.00 to $18.00. Recall that, in the third quarter, we expect revenue and non-GAAP EPS to decline versus the second quarter. We mentioned that on the second quarter earnings call.
And just to comment, Mohit, on the recent drug pricing legislation. Look, we believe price controls will stymie innovation, do little to improve affordability for patients. We feel our business is well-positioned for the long-term through a declining net price environment. We’ve been performing in that environment, and we expect to continue to perform well in that environment. And we said that at the business review this year. As we read the act, we think it favors large molecules. One of the strongest manufacturing footprints in the world that we have in biologics, we think, will be favored. And we like our low-cost structure in manufacturing, which we think is going to be key in the new environment.
We believe the world needs more innovation across the portfolio, we have a broad pipeline, which I’m sure you’ll get into with Dr. Reese, of innovative and biosimilar products that are meeting the needs of patients globally. Q2 reflected strong volume-driven growth for key products. Our planned acquisition of ChemoCentryx adds it’s newly launched innovative product to our portfolio, TAVNEOS or Avacopan, which addresses serious autoimmune diseases. We continue to advance the robust pipeline in the second quarter; TEZSPIRE, ROCATINLIMAB, OLPASIRAN, LUMAKRAS, TARLATAMAB, and several other very important pipeline molecules that we’ll get into, I’m sure.
I finally would wrap up by saying we’ll add a number of biosimilars over the next several years. And we look forward to the opportunities these will bring. We’re actively preparing for the United States AMJEVITA launch, on January 31, 2023, and our biosimilar to Soliris U.S. launch, in March of 2025. I’m going to remind you, on biosimilars, that our 2022 full-year outlook for [Embastics] [Ph] is about $850 million, [Congenta] [Ph] is about $300 million. We shared that with you at the end of the second quarter. Those reflect pricing pressure driven by competitive dynamics. And we would just remind everyone that long-term growth in the biosimilars business is driven by the addition of new molecules in new markets.
Continue with the strong balance sheet, significant free cash flows, $8.4 billion in the trailing 12-months through June. And we retained significant financial flexibility there to execute additional strategic business opportunities, and continue to invest in innovation, both internal and external.
So, with that, I’ll turn it over to you. Let’s just into Q&A.
Mohit Bansal
Thank you, Peter. This was great overview. Thank you very much for that.
Question-and-Answer Session
Q – Mohit Bansal
So, maybe I’ll just try to go back and forth between you and Dave. So, maybe Dave, [that there are] [Ph] data coming this weekend for LUMAKRAS, so, could you talk a little bit about, I mean, what — how you are internally thinking about the data you have seen so far, how excited you are? And then, the data that are coming this weekend, what would it inform?
David Reese
Yes, I can’t say much about the data in terms of the Phase 3 trial because we’re under embargo, that’ll be presented Monday, at the Presidential Session at ESMO. Just to remind everyone, that’s a head-to-head study against docetaxel, 345 patients. Progression-free survival is the primary endpoint. It’s got 90% power to detect a difference in progression-free survival. So, of course, we’ll have full details on this study at the Presidential Session, on Monday. We also have a presentation on colorectal cancer, on Monday. Continue to be very encouraged by those data and the overall progress of the LUMAKRAS program. I very much like the position that we’re in, we’re approved in over 40 countries now, launched in 25, and we’re really marching forward with the global program. So, a lot to come in the next few days, but I feel very good about where we’re sitting.
Mohit Bansal
Got it. And where do you — how do you think about the combination approach at this point? I mean, you had talked about three buckets in non-small cell lung cancer in the past, so, a shift to show really interesting data so far. And then, there may be other combinations that could be explored. So, how are you thinking about that?
David Reese
Yes, look, I think the thinking about the three segments of patients with non-small cell lung cancer based on tumor PD-L1 expression is probably how this is going to play out clinically. In the PD-L1-negative tumors, and this is a subset of non-small cell lung cancer where there’s, typically, a modest benefit of checkpoint inhibitors. We’ve got some very nice preliminary data with chemotherapy combination. And so, we’re moving forward with a Phase 3 study in that subset, and they’re roughly a third of the patients with non-small cell lung cancer. And I’ll have more to stay about the study design, timing, et cetera, as we get ready to launch that trial. We have had very good discussions with regulatory authorities, and have agreement on study design.
In those with PD-L1-expressing tumors, we presented data, of course, a month ago, in Vienna, at the World Congress on Lung Cancer, showing some challenges which has been seen with many small molecules in terms of the checkpoint inhibitor combination. We’re now taking an approach where we’re using a lower lead-in dose of LUMAKRAS, and then layering on the checkpoint inhibitor. And so, one question is whether we can find a therapeutic window with that approach. In patients where we could get the drug in the duration of response was almost a year-and-a-half, on average. So, there’s clearly activity, the question is can you generate a therapeutic window in enough patients, and that’s the question we’re answering in the clinic right now.
Mohit Bansal
Got it, that’s super helpful. So, maybe a question for you, Peter, so, you gave a long-term guidance. When we look at Amgen, so 2022 is more of a flatter year but, I mean, after 2022 there seems to be a two to three-year or three-year-plus period of good growth in the company, new products plus biosimilars, all that. So, when you — and then you are facing some [LOEs] [Ph] after that. So, when you think about beyond 2026, so first, is my characterization fair that about the next three years. And then after that, when you think about 2026 and beyond, how you’re thinking about managing those LOEs and do you think you have enough to manage the growth in that period?
Peter Griffith
It’s a great question, Mohit. So, we don’t and we didn’t breakout the next three years in how we’re going to grow, but we do understand how we’re going to manage through the denosumab LOE, which I think you’re referring to, in the early part of 2025. As we said it, and maybe let’s go back to business review for a moment, that was an organic plan.
Mohit Bansal
Right.
Peter Griffith
And it really was built upon what has now become the mountain chart.
Mohit Bansal
Right.
Peter Griffith
And so, if I could refer us all back to the mountain for a mountain, the foundation of the mountain was our established products, so it was Enbrel, which has an expiry in 2029. It was PROLIA which has the expiry Denosumab in 2025. It was our traditional products, legacy products as some call it, NEUPOGEN, Neulasta, EPOGEN, Aranesp, and so forth, it build that layer. Now, that layer does — if we examine the chart with it we used as our guide during business review, it does tend to follow down a little bit, but it does on a slower basis. And our point being, at business review, that foundation of the mountain is biologic, so they’re going to come down a little bit slower, maybe moderately more slower than small molecule.
So, that’s number one. And that helps us through delivering through to 2030. So, built on top of that was Otezla, which has an expiry in 2028. We continue to be excited about Otezla. I know there’s questions about competition entering the market. But when the acquisition was made, when the allocated $13.4 billion of our shareholders’ capital, we were very thoughtful about what was going to be coming. So, we’re fully prepared for that. It’s a very safe and efficacious drug. It’s been used to treat over 700,000 patients around the world. We, in December, received the mild-to-moderate-to-broad indication on that for psoriasis. So, that’s an important part of the Amgen story through 2028.
And if we go up on the mountain then, we get to Repatha. We called it a multibillion — and, by the way, on Otezla, we indicated low double-digit growth on average through ’20 — through the expiry, rather. On Repatha, multibillion dollar franchise. One out of three people in the world suffers from and dies from cardiovascular disease. We’re continuing to have very strong volume growth there. We certainly — we give up some price to get that. But we think it’s important to do that, and we think it’s important to establish that position. We’re very — very bullish on the path, so we’re going to continue to put our shoulder into that, invest in it, and keep it at the top of our priorities.
And then next on the mountain in the biosimilar franchise, which, as we said, we look at the 11 biosimilars that we’re going to have by the end of the decade is one super blockbuster. And we think the characteristics of the combination of the financial results of those look like a super blockbuster; it’s a great allocation of capital. We have AMJEVITA coming January 31, 2023. We’re fully prepared as a company and preparing for that launch. It’s critically important, we’re excited about it. Biosimilars was $2.2 billion in 2021; we said that would more than double by 2030. We did say that there’s a little bit of a slowdown or a little bit of a drop in biosimilars in 2022 before we get to the AMJEVITA inflection.
And that’s why we wanted to make sure that we were onboard with investors on MVASI and KANJINTI this year, and they kind of understood our position on that. But we’re very excited about biosimilars. We’re happier we have it today than we were a month ago. And we’re happier today than we were a year ago. We think it’s a very strong franchise. And, of course, on the top is really, I’d say without slighting any of our children in the portfolio or strata on the mountain, is our innovative pipeline, which is super exciting. We just — you talked about LUMAKRAS, the undruggable for three or four decades. TEZSPIRE is in — has a very strong launch. Tarlatamab, I’m sure you’ll ask Dr. Reese about that, that’s an extremely important development in small-cell lung cancer.
We’ve got through some inorganic activities through different types of strategic business development activities we’ve been able to get [BEMA] [Ph] in gastric — indication in gastric cancer. In Phase 3, we’ve got Rocatinlimab addressing atopic dermatitis and are licensing with Kyowa Kirin, which we’ve been working with them for any number of decades. So, that innovative pipeline is exciting. So, that mountain builds up to help us navigate for our patients, and our shareholders, and our staff to deliver to 2030. So, I think that’s the right way to kind of think about this, and that kind of that longer-term view overcoming whatever might happen, the puts and the takes in the next couple of years.
Mohit Bansal
Got it. No, that super helpful actually. And I’ll come back to that. And because you mentioned the Kyowa Kirin deal. So, on AMG 451, I think the question is, I mean, you did some — you are modifying the trial a little bit.
David Reese
Yes.
Mohit Bansal
Can you talk a little bit about what modifications you are making, and what is the purpose behind that?
David Reese
Yes. I’ll give specifics a little later, but this was on the basis of further discussions with regulatory authorities and our partners. We’re introducing what we think is what’ll be a more convenient dosing and scheduling paradigm for patients. I would point out, there was no new efficacy safety data, additional analyses that promoted this whatsoever. I don’t think that this will affect overall program timelines at all as well. So, we remain on track there. And we’ll say more of that suite of Phase 3 studies. In total gets up and running. This will cover a wide swath of patients with atopic dermatitis across age ranges, adolescents to adults, different ethnic groups, whether they’ve had prior biologics, prior JAK inhibitors or both or naive to biologic or JAK inhibitor therapies, so, very excited about that and its full steam ahead.
Mohit Bansal
Got it, super helpful. Other question, I would love for you to take that both from business and sci-fi point of view, so, Amgen has been a powerhouse in immunology with Enbrel, and now Tesla, but you do not have a lot of presence in IBD space because Enbrel was never approved there. So, from a business point of view, now that you will be launching Humira biosimilar, is that something you could look from the BD point of view, what you think about it?
David Reese
So, we have going on pre-clinically, we’ve got molecules actually in development and inflammatory bowel disease now, AMG 592, which is our IL-2 new team, that we’re doing a study and all sorts of colitis for example. This is — these are core autoimmune diseases, we’ve got a lot of experience in this area and so, inflammatory disease and bowel disease broadly, is something of interest. We also have a partnership in celiac disease with prevention for AMG 714, which targets IL-15. So, again, broadly this is an area of interest for us.
Peter Griffith
Probably a good way, important maybe to segue and for you and our investors and analysts to Segue into business development in the sense that as Dr. Ray said, we’re in that in research and we’re — that’s an important — that’s an important for us to check off. When we’re thinking about business development, we want to have research in the areas on oncology, inflammation, general medicine, we’re going to look in business development there because you asked the question about what we look forward and business development, I would suggest we are always looking in any of those three areas, so the apertures open there. We’re agnostic about size and shape and structure in the last year-and-a-half or so Mohit, we’ve done collaborations Arrakis and generate Bioscience in the very early preclinical areas, a number of acquisitions importantly ChemoCentryx, importantly Five Prime and importantly Teneobio even Rodeo therapeutics, which I think was alternative clients. And so, very early, so acquisitions licensing with key recurring inlicensing, outlicensing with some of the neural assets, so we’re agnostic on that.
So, modalities, you’ll see a sec about those two, we’re open to the business development always happen. So, we think about in business development we’re looking at, do we have research in those areas? Do we exceed our hurdle rate in terms of cash-on-cash? Is it something that we can integrate or we can affect the collaboration quickly, and achieve those returns as quickly as possible? That’s how we think about it. So, it’s a long answer, but maybe a good opportunity to just share a little bit with the group about how we think about business development, which doesn’t change. We want to be predictable and consistent. And we always end by saying we want to make sure we’re achieving returns for our shareholders, not just the shareholders on the other side of whatever deal we might be doing.
Mohit Bansal
Got it. And then, on that same topic, so when I mentioned 2.26 and beyond, I was mentioning obviously did not summer franchise, but I think Tesla will also go off I think that five-year window after that and then maybe Enbrel as well at that point. So, does it make you go more aggressive in business development in that three-year period, so that you can take care about the take care of the period after that?
Peter Griffith
I think aggressive maybe with some people indicated change, we are going to continue our pace and it’s a very strong pace, we’ve always had a strong, steady, predictable, consistent pace in business development. And we don’t ever anticipate jerking the wheel to the left or the right. What we want to do is continue down the principles we just talked about. We have research in the area. It’s something we think we can get integrated or we get the collaboration or the licensing affected quickly and achieve the returns hurdle rate, exceeds the cash on — the cash-on-cash flow rate. The cash-on-cash return exceeds the hurdle rate rather. So, we’re going to check those off. We’re going to just make sure those are working. And so, we’re always out. We’re always on pace last year seven strategic transactions, we’ve talked about from Rodeo to Five Prime to the key to licensing to Teneo to the numerous licensing to Arrakis and generate bioscience to this year, became a centric field. That’s probably a really good one to just pause for a moment on and say in inflammation. Check, strong returns, check, we — what can we do with that asset? That ChemoCentryx, couldn’t great company we just love the people, I think they’re fabulous. And what we can do is we’ve been dealing with nephrologists for decades.
And so, we’re there and certainly with the rheumatologist too, which they were doing a nice job with. So, we can add to that, we can get that to patients faster, we think and get it out there. So, that’s we ask ourselves that too, in business development. So, add that all up, we think we tend to be knowing what’s in the market, what the opportunities are. We have an opinion on everything. We have a very disciplined business development process. Dave and Murdo who heads up commercial and [indiscernible] who heads the business development, myself, we’re all very active together. We have opinions on what’s out there. And we’re going to continue to scrub it and when it hits our criteria, and it’s meaningful, and I’ll use the word we’re the best buyer, the best transact, you’re on it. We’ll do our best to get it done for our shareholders, to get them the returns, we want to get them.
Mohit Bansal
Got it. That’s super helpful clarification there. Thank you for that. The other topic I want to touch upon is the small cell lung cancer program. Unfortunately, did not get touched upon on the call you hosted because of because of the checkpoint combination with the LUMAKRAS, but I think you saw a really interesting data there and I think that the third line and really sick patient, the OS was pretty good. So, I mean, how do you really think about the data first and then what are the next steps to expedite this?
David Reese
Yes, no, I’m glad you brought that up. This is the Tarlatamab AMG 757 program that targets DLL3 in small cell lung cancer. We presented data as you indicated about a month ago at the World Congress on lung cancer meeting in Vienna. The response rate was 23%, a little bit higher in those with higher levels in DLL and the expression, but what really intrigues us and I think got the attention of the field is the median duration of response and responders was over a year out 13 months, which is remarkable in this patient population where overall survival is often measured in less than a handful of month. The overall survival in this cohort was 13 months, so, very, very impressive durability in those who are achieving our remissions. With tremendous enthusiasm from our investigators, we are enrolling now a potentially registrational Phase 2 trial that’s enrolling very, very briskly and that’s usually an indicator of enthusiasm, the physicians and patients are generating around the molecule and based on what they’re seeing in the clinic. So, that will provide guidance as we go along in terms of timing of data availability.
Further development is designed to move into earlier lines of therapy. To me the endgame here is to getting into early lines of therapy, where you’ve got a lower burden of disease and given the activity we’ve seen taking a shot at really changing the natural history of this disease and trying to improve survival. So, we’ve got a cohort study open now when the study in first line disease, for example, that is examining Standard of Care plus Tarlatamab, and that will then form the basis of further development.
Mohit Bansal
Got it. That’s super helpful. Thank you for that. And then the other question I hear a lot is around test buyer. It is a great drug especially among low skilled patients. Do you think the label of the doctor should be administered at doctor’s offices? Has any bearing there and is there anything you could do to more trials or anything that could help it become more at home administered drug?
David Reese
Yes, it’s a good question. Right now, we haven’t seen that as a barrier in office administration. These are patients with moderate to severe asthma. They are typically seen frequently by their treating physicians to monitor the course of the disease. So, the feedback has really been tremendously positive from that community. We haven’t seen that in office administration as a barrier. That said, we’ve completed clinical work for an auto injector, which would permit home injection, we’ll say more as we go along about potential availability of that in the United States and elsewhere, but right now logistically, it hasn’t been a major issue that we’ve encountered.
Q – Mohit Bansal
Got it, super helpful. Another question is given that — I mean your expertise in biosimilar, now you are launching I think the first major Part D biosimilar [indiscernible]. Next year, will be launching Humira. So, how do you think immunology market is going to be different from the oncology market that you have launched so far? And also it’s Part D drug, so how do you think the dynamics are going to be little different in terms of pricing and negotiations?
A – Peter Griffith
I think the most important thing about AMJEVITA launch is we’re ahead of everyone by 5 months.
Q – Mohit Bansal
Right.
A – Peter Griffith
That’s first. And I think when you look at Amgen and you think about it, Mohit, whether it’s inflammation or whether it’s oncology for biosimilars, our — we have this strong patient experience — great patient experience; great history of biologics, very steady and predictable supply chain. And we market our biosimilars I think as everyone recalls with our commercial therapeutic area. And we think that efficiency and that’s very helpful. So, when we think about pricing and working with PBMs and payers and so forth, that’s all together, AMJEVITA, it’s with Enbrel. It’s with Otezla. It’s with TEZSPIRE in our inflammation portfolio in our negotiations with formularies and so forth. We think that’s helpful. And so, we feel really well positioned with it. From — an opportunity to go out and work on conversions to patients to AMJEVITA, it starts January 31, 2023.
We said that we feel like that’s a moment for ourselves and our company to really kind of inflect on this growth pattern towards 2030. We think it’s really important first for patients and then for our shareholders and for our staff to drive the company forward. So, we are excited about that. The company is totally focused on it. Not just the pricing side of it and so forth, but delivering it. The digital side of it making sure we’ve got that all set up and ready for patients and providers. And so, we are looking forward to that. We think it’s going to be a great opportunity to continue our strong execution in the biosimilar market.
Q – Mohit Bansal
Awesome. So, maybe another question for you, Dave, when we look at 10-K or 10-Qs for Amgen every time like we see new Phase 1 assets entering. So, it seems like there has been a lot of influx of new assets coming in. And I think you have like multiple — I don’t — I am losing count of numbers now. But, do you think Street is giving enough appreciation for the fact that you have such a strong early stage R&D at this point? And if you have to pick out 3 or 4 assets which you think could be big assets towards the end of the decade, what would that be?
A – David Reese
Yes, sure. Yes, I mean we really like the pipeline across phases. If I march through therapeutic areas, in inflammation we have talked about the LUMAKRAS program that’s probably the flagship. In General Medicine, the Olpasiran program is one to pay attention to targeting Lp(a) which is a driver of atherosclerotic cardiovascular disease. We will report that hopefully in a couple of months in one of the major cardiology congresses the data from our Phase 2b study, that data looked very, very nice across. Dose levels showed in almost all groups sustained greater than 90% reductions in Lp(a) levels with no new safety findings as we indicated in our press release. So, those full data will come. But that one we are more quickly towards Phase 3. In the oncology pipeline another molecule that I would indentify that we haven’t discussed yet is AMG 509 which is a bispecific that targets STEAP1, which is widely expressed in advanced prostate cancer.
I showed some preliminary data at the Business Review. In February, we will have data from that first in human trial later in the year or first of the next year hopefully in one of the oncology congresses. But very, very pleased with the efficacy and safety profile we are seeing there right now. And that was the target that we had helped identify and prosecute. And so, that one is moving along pretty quickly and is we are keeping an eye on.
Q – Mohit Bansal
Got it.
Peter Griffith
What about 133?
A – David Reese
AMG 1 — Thanks for the reminder.
Peter Griffith
I am looking at all the good food out there. [Multiple Speakers]…
A – David Reese
I was referring to AMG 133, which is a bifunctional molecule targeting the GLP-1 and GIPR pathways for obesity. We have completed the Phase 1 trial. We have submitted those for a — those data for presentation hopefully later in the year at scientific conference. And things to pay attention there, what’s the magnitude of weight reduction, what’s the tolerability profile. We are moving quickly towards Phase 2 development. And I’ll have more to say about that as we get ready to get the Phase 2 program up and running. But that one is moving along briskly as well.
Mohit Bansal
On that high note, thank you very much for joining us today. Really appreciate you providing us time.
Peter Griffith
Thank you, Mohit. We thank you, and we thank Wells Fargo.
Mohit Bansal
Thank you.
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